Eco-friendly CEO? Cinergy's Jim Rogers ponders coal's future in a "carbon-constrained world."

Chief Executive, The, April, 2005 by Ken Stier

Cinergy's Jim Rogers wants to position himself as a leader on climate change, but that's hard when you're CEO of one of the country's most coal-dependent electric producers. Its plants are major emitters of carbon dioxide (C[O.sub.2])--the most plentiful and problematic of the greenhouse gases that cause global warming.

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Reducing pollution means spending more on technology to control it, or simply reducing production. The Clean Air Act of 1970, for example, gradually tightened emissions of coal's traditional pollutants--sulfur dioxide and nitrogen oxides. Pollution control devices that keep companies in line with those regulations require electricity that can initially consume as much as 20 percent of a plant's output. And the power industry as a whole will have to spend $64 billion by 2020 to comply with a further tightening as well as new mercury regulations enacted March 10, calculates Cambridge Energy Research Associates.

Little wonder utilities are so unenthusiastic about reducing carbon emissions as well. But Rogers, repeating a company mantra he uses frequently, says the future is an inevitably "carbon-constrained world" reflecting growing concern about climate change, which Rogers thinks industry should prepare for.

Such talk is unusual coming from an energy CEO. But Rogers is not just talking. He is seriously grappling with the issue--in speeches, in meetings with environmentalists, in company reports, and where it counts most, in voluntary measures to reduce carbon emissions.

For these reasons, Cinergy gets high marks from some environmentalists, and that is high praise indeed. "In an industry that has hundreds of players, I'm able to rattle off the top of my head under 10 who have said they are going to deal with climate change," says Jessica Holliday of Environmental Defense, a nonprofit organization that works with companies on market-based pollution solutions. "In this industry to even say 'climate change' is a big deal."

The company's December "Air Issues" report that examined the financial implications of future scenarios of carbon constraints also has won praise. The investment arm of the Presbyterian Church, which co-sponsored shareholder resolutions that asked for the risk assessment, praised Cinergy's report as "groundbreaking" and for having "modeled leadership in corporate social responsibility." Two other coal utilities also targeted by similar shareholder pressure for being major polluters--American Electric Power and TXU Energy--have come out with similar reports. So far, however, Cinergy has won the most praise for its candor, working with outside environmentalists, making it a board-level issue and doing most of the work in-house to develop long-term expertise in this area.

For one, Cinergy's company reports clearly spell out that it is currently emitting 74 million tons of carbon dioxide from nine pulverized coal plants. And Rogers says the company is committed to curbing greenhouse gases by 5 percent from there. In a business-as-usual scenario, emissions would have increased to 80 million tons per year; instead, Rogers plans to keep them to 70 million in the 2010-2012 period--a net reduction of 30 million tons. The company has earmarked $21 million for the purpose. Rogers is not sure $21 million even meets his own "grandchildren test" of taking "a truly long-term view" mindful of their welfare. But he is quick to point to other efforts lowering the company's overall pollution profile, including converting a coal-burning plant to gas, which produces two-thirds less C[O.sub.2].

While there are efforts in Congress, such as the McCain-Lieberman Climate Stewardship Act, that would mandate C[O.sub.2] reductions, their passage is unlikely anytime soon. And Rogers says he would prefer to start such efforts voluntarily now so the company can learn as it goes along and be better prepared for inevitable mandatory caps. The firm spent $2 billion in the past decade meeting earlier non-carbon reduction requirements, and will spend a similar amount in the next 10 years doing so.

Much of the industry is opposed to even reporting C[O.sub.2] emissions and has helped Congress block such requirements. Utility companies account for 37 percent of the country's total C[O.sub.2] emissions. (The transport sector is responsible for a similar share.) The Kyoto Protocol, rejected by the United States, calls for reducing carbon emissions by at least 5 percent below what they were in 1990.

The only other U.S. utility to have spent real money reducing absolute carbon emissions is Entergy, which spent $25 million over the last five years, according to Holliday, who has worked on both efforts.

Cinergy also is involved in developing new, cleaner coal technology--specifically the integrated gasification combined cycle (IGCC) plant. It offers significant reduction in pollution emissions, including the possibility of capturing carbon that can be stored or sequestered underground. The Department of Energy has spent billions to develop the technology, including setting up two demonstration plants. But it can take years of tinkering with plants to work out the kinks; usually, companies prefer to see peers go first while they learn on the sidelines from others' mistakes. But Cinergy is one of three companies ready to proceed anyway. After a recent encouraging feasibility study, done with General Electric and Bechtel, Rogers intends to build what may be the first commercial-scale IGCC plant in the U.S. "I am making a bet on gasification because I don't see any other way forward," Rogers told the Washington, D.C.-based environmental think tank Resources for the Future.